Oil Plunges 11% as Strait of Hormuz Reopens

Recap: The oil market plunged more than 11% on Friday following Iran’s announcement of the reopening of the Strait of Hormuz. The crude market traded in a sideways trading range in the overnight session, posting a high of $94.04, as the market weighed the possibility of further talks between the U.S. and Iran over the weekend to end the war against the unlikely prospect for an immediate reopening of the Strait of Hormuz. However, the market sold off sharply, extending its losses to over $14 as it sold off to a low of $80.56 by mid-morning. The market plummeted after Iran’s Foreign Minister Abbas Araqchi said the Strait of Hormuz was open following the agreement of a ceasefire between Israel and Lebanon. The market sold off sharply despite U.S. President Donald Trump stating that the U.S. military blockade of ships sailing through the Strait to Iranian ports remained in place. He said that blockade would remain in full force until “our transaction with Iran is 100% complete”, which he said should happen very quickly given that most points were already negotiated. The market later retraced some of its losses and traded back over the $84.00 level ahead of the close. The May WTI contract settled down $10.84 at $83.85 and the June Brent contract settled down $9.01 at $90.38. The product markets ended the session sharply lower, with the heating oil market settling down 43.55 cents at $3.3974 and the RB market settling down 15.89 cents at $3.0048.

Technical Analysis: The crude market on Monday will look to the news seen over the weekend for further direction. It will look to see if there was a meeting between the U.S. and Iran and whether an agreement was formalized to end the war in Iran. The market is seen finding support at $80.56, $75.64, $73.79, $72.19, $69.93, $69.00, $67.78 and $67.65. Meanwhile, resistance is seen at $90.80, $94.04, $94.72, $95.44, $98.00, $99.10, $103.47 and $105.63.

Fundamental News: The U.S. Department of Energy said it had loaned 26.03 million barrels of crude oil from the Strategic Petroleum Reserve to nine oil companies, the third allotment under the Trump administration’s effort to cut fuel prices that have increased since the U.S.-Israeli war on Iran. Companies that have been awarded SPR loans include BP Products North America, ExxonMobil Oil Corp and Marathon Petroleum.

ING analysts estimate that about 13 million bpd of oil flow has been disrupted by the closure of the Strait.

The Interior Department said the Trump administration will hold a sale of oil and gas leasing rights in Alaska’s Arctic National Wildlife Refuge on June 5^th. The sale is the first of four in the region that were mandated by U.S. President Donald Trump’s One Big Beautiful Bill Act, which he signed into law last year. ANWR’s 1.6 million acre coastal area along the Beaufort Sea is estimated to have up to 11.8 billion barrels of recoverable oil.

Baker Hughes said U.S. energy firms this week cut the number of oil and natural gas rigs operating for a second consecutive week for the first time since March. The oil and gas rig count fell by two to 543 in the week ending April 17^th, the lowest level since late March. Baker Hughes said oil rigs fell by one to 410 this week, their lowest level since late March, while gas rigs fell by two to 125, their lowest level since January, and other miscellaneous rigs rose by one to eight.

IIR Energy said U.S. oil refiners are expected to shut in about 929,000 bpd of capacity in the week ending April 17^th, cutting available refining capacity by 140,000 bpd from the previous week. Offline capacity is expected to fall to 558,000 bpd in the week ending April 24^th.

Saudi Finance Minister Mohammed Al-Jadaan welcomed news that Iran would reopen the Strait of Hormuz, clearing the path for oil shipments to resume, but warned that the situation in the Middle East remained very fragile. He said certain countries would be able to restore their production capabilities quickly, but others would need more time, depending on the extent of the damage they suffered.

Early Market Call – as of 8:55 AM EDT

WTI – May $88.33, up $2.76

RBOB – May $3.1044, up 8.77 cents

HO – May $3.5535, up 11.59 cents

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